Futures & Commodities

Gold eases on firmer dollar as U.S. inflation data looms

Key Points
  • Spot gold was down 0.2% to $1,804.80 per ounce by 1:50 p.m. ET.
  • U.S. gold futures settled 0.3% lower at $1,805.90.
An Argor-Heraeus SA branded two hundred and fifty gram gold bar, center, sits in this arranged photograph at Solar Capital Gold Zrt. in Budapest, Hungary.
Akos Stiller | Bloomberg | Getty Images

Gold fell on Monday in step with a stronger dollar as investors cautiously looked forward to U.S. inflation data that could influence the Federal Reserve's timeline for easing its bond purchases.

Spot gold was down 0.2% to $1,804.80 per ounce by 1:50 p.m. ET. U.S. gold futures settled 0.3% lower at $1,805.90.

The closely watched U.S. consumer price index (CPI) report is due to be released on Tuesday. Fed Chair Jerome Powell is scheduled to testify before Congress on Wednesday and Thursday.

"We're almost in this environment where good news is bad news and bad news is good news," said David Meger, director of metals trading at High Ridge Futures, referring to the CPI data and its impact on Fed policy.

If inflation data becomes more benign, the Fed would feel slightly less inclined to ease its asset purchases, which should benefit gold, but if it is concerned about inflation, it is more likely "to tap the brakes," pressuring gold, Meger added.

Economists polled by Reuters expect core U.S. consumer prices to have risen 0.4% in June.

The dollar index rose 0.1% against its rivals, raising gold's cost for holders of other currencies.

Analysts at JP Morgan suggested in a weekly note that gold investors' cautious stance was warranted given their view of steadily rising yields and the dollar being supported around current levels until the end of this year.

The bank forecasts gold to average $1,686 per troy ounce this year.

Market participants also seemed to look past a spike in cases of the Delta variant of the coronavirus in some countries.

It seems very unlikely that the Delta variant will have a broad-based economic impact, so safe-haven demand for gold and silver is unlikely to pick up in the short term, said Carsten Menke, analyst at Julius Baer.

Elsewhere, silver rose 0.3% to $26.15 per ounce, palladium gained 1.6% to $2,852.81 and platinum was 1.2% higher at $1,116.91.